Stock Analysis

Crest Nicholson Holdings (LON:CRST) Will Pay A Larger Dividend Than Last Year At UK£0.055

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LSE:CRST
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Crest Nicholson Holdings plc (LON:CRST) will increase its dividend on the 13th of October to UK£0.055. Although the dividend is now higher, the yield is only 5.7%, which is below the industry average.

Check out our latest analysis for Crest Nicholson Holdings

Crest Nicholson Holdings Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. Crest Nicholson Holdings is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Looking forward, earnings per share could 40.1% over the next year if the trend of the last few years can't be broken. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

historic-dividend
LSE:CRST Historic Dividend June 17th 2022

Crest Nicholson Holdings' Dividend Has Lacked Consistency

Crest Nicholson Holdings has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The first annual payment during the last 8 years was UK£0.065 in 2014, and the most recent fiscal year payment was UK£0.19. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Crest Nicholson Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 40% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Crest Nicholson Holdings' Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Crest Nicholson Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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